Balanced Scorecard

Often abbreviated to BSC, the Balanced Scorecard is also known as the Balanced Business Scorecard (BBS), this is a
simple framework defined by Norton and Kaplan for creating business
metrics that goes beyond the basic financial measures that many companies
have relied solely upon for many years.

Financial measures are important
because they tell you useful things like whether you are making a profit,
but they only do this after the fact. If you want to get some warning
about some impending financial problems before they happen, you can get
this by measuring customer factors, such as satisfaction. You can
also go further upstream to get warning about customer problems by looking
at internal factors, such as process operation and delivery. And
you can go even further upstream by looking at people factors, such
as education and employee satisfaction. The four areas offered for
measures that together make up a balanced business scorecard are:

Financial

Customer

Internal

People

The idea is thus that by understanding causal relationships, you
can measure upstream to get early warning of problems so you can address
them before they affect the money in your pocket.

It is perhaps an indictment
of many companies that they found such a simple idea so revolutionary. It
is also a good lesson for those of us seeking to change the company that
simple ideas that play interests can be very powerful.

Kaplan and
Norton's have extended the scorecard idea into creating strategy with it,
which seems rather strange: it would seem that starting from the strategy
is a more normal approach. Perhaps it appeals more to people who are so
measurement focused that this is their natural starting point.